Ineos hits out at government ‘madness' after green subsidy is pulled
Sir Jim Ratcliffe's chemicals giant Ineos has accused the government of 'madness' over plans to effectively punish it for making one of its major plants more environmentally friendly.
Ineos Acetyls, which makes the acetic acid used in food production, medicines and synthetic fibres, spent more than £30 million switching the fuel source at its factory in Hull from natural gas to low-carbon hydrogen. The move has cut its carbon emissions by 75 per cent.
However, the Environment Agency has said that, rather than support the move, it would cut Ineos's carbon subsidies, costing it £23 million over the next three years.
Ineos Acetyls chief executive David Brooks said: 'We are being punished for doing the right thing. We've delivered on decarbonisation, exceeding our expectations, and this is the response we get.'
He added that he was fighting competition from imports from China, which use cheap, coal-fired energy to produce acetic acid with a carbon footprint eight times greater than his Hull plant. 'It feels like, instead of fighting our competitors, we're fighting our government,' he said.
The factory is already lossmaking, he said, and the Environment Agency's decision meant he was having to pause all further investment decisions. The site employs more than 300 workers.
The facility was opened by Queen Elizabeth in 1981, but the agency had decided to reclassify it as a 'new-build' factory as a result of the improved process.
This means it will not receive its allowances from the UK Emissions Trading Scheme (ETS) until 2028.
Under the ETS, industrial plants are gifted allowances by the Environment Agency to emit a certain amount of greenhouse gases, beyond which they have to buy credits. The idea is to incentivise polluters to emit less. However, the agency's stance on Ineos Acetyls means that, for the next three years, it will have to buy all of its allowances on the market, which at present prices will be approximately £23 million.
Ineos has been appealing to the Environment Agency, which operates the ETS system and is run under the umbrella of the Department for Environment, Food and Rural Affairs (Defra).
Officials from the Department for Energy Security & Net Zero, the Department for Business & Trade and the Treasury, as well as the devolved governments, are also involved, Brooks said. 'It's a civil service soup of decision-making and it's very difficult to see who is actually making the decisions around this.
'So we're frustrated to get to the right people to talk to, we're frustrated it's taking so long to get what we believe is a slam dunk, and we're frustrated it's such a battle to get people to see common sense.'
He described the Environment Agency's reaction as 'computer says no' because the Ineos technology is new.
Ineos shut its refinery in Grangemouth after spending three years trying to obtain government subsidies to keep it open.
Its decision to halt further investment in the Hull plant comes as Britain's biggest bioethanol plant nearby, owned by Associated British Foods, is threatened with closure after the US-UK trade deal allowed tariff-free US ethanol to enter the UK.
The MP in Ineos Acetyls' neighbouring constituency, Kingston upon Hull West & Haltemprice, where many of the plant's workers live, is Emma Hardy, parliamentary under-secretary at Defra. Brooks said he had written to her and been told the decision is 'in the system'.
Brooks has a meeting with officials from the Department for Energy Security & Net Zero and the Department for Business & Trade this week, but Defra and the Environment Agency are not due to attend.
The Environment Agency said it was the regulator for the UK ETS Scheme and was supporting the Department for Energy Security & Net Zero in its discussions with company representatives about activities at the site.
On Saturday afternoon the Environment Agency contacted The Sunday Times again and said Ineos would continue to receive free allowances. It said that Ineos needed to provide 12 months of activity data under the new, cleaner technology for its allowances to reflect the switch.
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